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What can anthropologists of finance teach us about the MERS we now find ourselves in?

by Vincent Antonin Lépinay

The Mortgage Electronic Registration System (MERS) is one of the central legal innovations behind the 2008 toxic assets financial crisis. It has simplified the conditions of property transfer and made possible a mortgage-backed secondary market. If only these smart lawyers and financial engineers had read Marcel Mauss, Gabriel Tarde and Nicholas Thomas…

Finance zealots, like Nobel Prize winners Robert Merton or Merton Miller, have boasted a unique ability to design goods in response to minute changes in markets. They have also bragged that regulation was the most naïve of attempts made to curb that excess of innovation: financial engineering would find its way around rules, and even more to the point, it would use them and combine them to defeat them. In so doing they have both promoted financial innovation and kept it at a distance, as an impossible topic.

Innovation has always enjoyed a mysterious modus operandi among scholars, but finance scholars have made it into the ultimate economic gesture, both central and elusive, foundational of economic value creation and always surprising. Markets and communities would morph in reaction to regulation, make them irrelevant and wrap the mechanism of value creation in high mystery. The heart of markets – both the circulating goods and the vectors of circulation as the values animating transactions – remain protected from investigation. This is very unfortunate and this has been diagnosed as the flaw of bourgeois market mythologies since at least Marx pointed to the commodity as the site concealing the mechanisms that need to feature front and center of social sciences. This site is all the more in need of close investigation that whenever attention has been paid to the production of goods, the myth of instantaneous and immediate reaction of finance to regulation has been substantially amended. This modification has played against financial economists’ dream of finance as an information game. It also played against a similarly strong myth entertained by social scientists themselves, embracing the distinction between social values – the business of sociologists and anthropologists - and economic value – the business of economists. If we pay attention to MERS, we see simultaneously the near collapse of an entire economy and the crisis of a mode of property transfer, enrolled by financial institutions. The Jeffersonian dream of a Nation of small owners has been both brought to reality and upset by MERS. Quite a topic for anthropologists.

An anthropology of finance interested in disrupting this division of labor and challenging this naïve view of finance does not repudiate the passion for innovation but turns its magical character into a topic. The premise of the arrogant discourse about financial innovations unstoppable elusiveness is that of goods entirely under the control of their masters, the financial engineers. In the ever-complex jungle of financial regulations, new goods designed to defeat the legislator are presented as transparent vehicles. As complex as the rules they dodge, but always simple. I use these two notions of transparency and simplicity to position this extravagant claim against the backdrop of more than a century of economic anthropology’s close attention to the circulation of goods. The one thing we have learned over and over again is that goods are very rarely neutral, simple and transparent. Although economic theory has entertained the fiction of such goods, finance theory has believed in the reality of these because the design of finance seemed to make them belong in a world of pure information game: designed, hence simple. No longer attached to Nature, as were the fictitious goods of Adam Smith or David Ricardo - their wheat, pig and iron - finance goods seem to effortlessly float in the world of pure information.

This view neglects the condition of production of finance and the fact that far from being exercises in information design, they are what we could call long and sticky transactions. Economic anthropology has always warned us that the economic fiction of neutral goods should be treated with most caution as it assumes the most difficult and the very object of these transactions: peace and agreement. Mauss and Thomas remind us that transactions are always rife with germs of wars. The cycles of gift and counter gift formulated by Mauss are one solution against the possibility of wars: keeping goods and persons in one infinite but choreographed loop. There, no possibility to break away and to close once and for all the transaction and the ties with the other party. Everybody (as member of a group) is in it forever and goods keep the traces of their circulation so that they are never simple and transparent goods but always “reciprocal possession through extremely various forms of all for all” following a definition of society by Gabriel Tarde, or put another but as insightful way by Nicholas Thomas, deeply entangled.

Why should we pay attention to Mauss and Thomas when we study finance now? Because financial transactions exhibit features that make them resemble increasingly archaic forms of economic transactions. Modern finance, despite its celebration of a form of information-finance, is exacerbating sociotechnical entanglement. Against the idea that financial engineering plays effortlessly off and around the interstices of regulation, the past 20 years of financial experimentations that we painfully start to decode an exacerbation of sociotechnical ties. One of the first lessons learned is that too much entanglement threatens speculation, the core value of financial zealots. The ability to speculate is a function of the simplicity of the good and as new designs are tried to circumvent regulations, this ability declines and with it the dream of building asymmetric social relations encapsulated in the notion of speculation. In its stead we find a social and economic mess, personified by the current scandal of MERS, where nobody knows who owns what, where property and properties are blurry and where war becomes a solution anew.